5/11/11

Must Read: David Brooks on Financial Self-Restraint

Financial self-restraint should be America's next culture crusade

Centuries ago, historians came up with a classic theory to explain the rise and decline of nations. The theory was that great nations start out tough-minded and energetic. Toughness and energy lead to wealth and power. Wealth and power lead to affluence and luxury. Affluence and luxury lead to decadence, corruption and decline.

"Human nature, in no form of it, could ever bear prosperity," John Adams wrote in a letter to Thomas Jefferson, warning against the coming corruption of his country.

… despite the country's notorious materialism, there has always been a countervailing stream of sound economic values. The early settlers believed in Calvinist restraint. The pioneers volunteered for brutal hardship during their treks out west. Waves of immigrant parents worked hard and practiced self-denial so their children could succeed. Government was limited and did not protect people from the consequences of their actions, thus enforcing discipline and restraint.

When economic values did erode, the ruling establishment tried to restore balance. After the Gilded Age, Theodore Roosevelt (who ventured west to counteract the softness of his upbringing) led a crackdown on financial self-indulgence. The Protestant establishment had many failings, but it was not decadent. The old WASPs were notoriously cheap, sent their children to spartan boarding schools, and insisted on financial sobriety.

Over the past few years, however, there clearly has been an erosion in the country's financial values…in the three decades between 1950 and 1980, personal consumption was remarkably stable, amounting to about 62 percent of GDP. In the next three decades, it shot upward, reaching 70 percent of GDP in 2008.

During this period, debt exploded. In 1960, Americans' personal debt amounted to about 55 percent of national income. By 2007, Americans' personal debt had surged to 133 percent of national income.

…Our current cultural politics are organized by the obsolete culture war, which has put secular liberals on one side and religious conservatives on the other. But the slide in economic morality afflicted Red and Blue America equally.

If there is to be a movement to restore economic values, it will have to cut across the current taxonomies. Its goal will be to make the United States again a producer economy, not a consumer economy.

It will have to take on what you might call the lobbyist ethos -- the righteous conviction held by everybody from AARP to the agribusinesses that their groups are entitled to every possible appropriation, regardless of the larger public cost. It will have to take on the self-indulgent popular demand for low taxes and high spending.

A crusade for economic self-restraint would have to rearrange the current alliances...that are now deemed politically impossible. But this sort of moral revival is what the country actually needs.